Arab airlines face €3.82bn loss in 2026 amid EU ETS row

Arab airlines are forecast to record a collective net loss of $4.3 billion (€3.82 billion) in 2026, according to the annual report of the Arab Air Carriers’ Organization (AACO). The figures were presented at the AACO annual general meeting in Doha this week, hosted by Qatar Airways. The report cites “geopolitical uncertainties” and “fluctuating financial conditions” as key factors hitting regional carriers’ balance sheets.

But the outlook isn’t uniform across the region. The report says member performance is “likely to vary considerably depending on hub locations and exposure to conflict-affected markets.” Air cargo traffic for AACO members is expected to decline by 5.2%. Meanwhile, the global airline industry is projected to post a net profit of around $23 billion (€20.5 billion) — the “lowest level in 12 years excluding the COVID-19 period and its aftermath.”

Fuel costs and EU emissions trading scheme

Fuel is expected to account for 37.3% of AACO members’ operating costs in 2026, up from 27.9% in 2025. The industry average is 31.4%, up from 25.4%. At the Doha meeting, AACO members raised concerns over the EU’s proposed Emissions Trading System (ETS) extension. The association adopted a resolution opposing the extension of ETS to flights departing the European Economic Area and landing in third countries within a 5,000-kilometre radius of Frankfurt Airport by 2029.

Abdul Wahab Teffaha, AACO Secretary General, said the EU had decided to set targets beyond those agreed by the International Civil Aviation Organization. Teffaha said that was within the EU’s sovereign rights. But he warned the ETS move was “extra-territoriality, trespassing on the sovereignty of others.” He said the 5,000 km zone covers “Turkey, through Iraq, down till Dubai, up till Sudan, Egypt, up to Morocco.” Teffaha added that the move would undermine the Chicago Convention, which gives states complete and exclusive sovereignty over their airspace. If ETS becomes law, Arab carriers could face double costs for emissions reductions, as the existing CORSIA framework already requires offsetting.

Growth plans despite headwinds

Qatar Airways Group Chief CEO Hamad Al-Khater, session chairman, said regional cooperation had become the industry’s greatest strength. He said the sector supports up to four million jobs across the Middle East and injects $290 billion (€258 billion) into the regional economy, a figure set to rise to $730 billion (€649.9 billion) by 2043. Qatar Airways is increasing flights to European cities including London Heathrow and Frankfurt, and to Asia, Africa and Australia.

Emirates also remains focused on growth. Deputy President and Chief Commercial Officer Adnan Kazim said, “For us, the way forward is further growth.” He added, “There are so many markets that we haven’t yet tapped. At the same time we’re working with enhancing corporations with many European carriers to add value – but for us Europe definitely remains core in the Emirates strategy.” Kazim said fluctuating fuel prices hadn’t shaken the airline’s plans, and Emirates continues retrofitting its fleet with $7 billion (€6.2 billion) in investments. In October, Emirates launched a daily route to Helsinki, enhancing its Nordic network.